Market Overview

FBR Upgrades Centene To Outperform, Says 'Sell-Off Creates Opportunity'

Share:

In a report published Monday, FBR Capital Markets analyst Steven Halper upgraded the rating on Centene Corp (NYSE: CNC) from Market Perform to Outperform, while raising the price target from $80 to $90 to reflect the acquisition of Health, Net, Inc (NYSE: HNT).

Centene's shares have declined over concerns surrounding the company's long-term growth prospects after it announced the acquisition of Health Net.

"The acquisition brings along some unique attributes to Centene, along with a major presence in California. Health Net also adds many capabilities beyond Centene's historical Medicaid and specialty focus," analyst Steven Halper wrote.

In the report FBR Capital Markets noted, "We assume the combined company's growth rate over the next few years will be about half of our standalone Centene model."

Centene expects to realize $150 million in annual cost synergies by the second year after the close of the acquisition. Halper expects Centene to generate top-line growth in the mid-high-single-digit range for the next five years after factoring in Health Net. This compares with the earlier forecast of low-double-digit top-line growth.

"We continue to assume modest margin expansion and modest levels of capital expenditures. We forecast higher levels of statutory capital based on expectations of higher premium growth," Halper added.

The recent pullback in Centene's shares, expectations of continued strong performance and the acquisition of Health Net make the risk/reward trade-off more "compelling," the report stated.

Latest Ratings for CNC

DateFirmActionFromTo
Nov 2019MaintainsOverweight
Nov 2019MaintainsBuy
Oct 2019MaintainsBuy

View More Analyst Ratings for CNC
View the Latest Analyst Ratings

Posted-In: FBR Capital MarketsAnalyst Color Upgrades Price Target Analyst Ratings

 

Related Articles (CNC + HNT)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
VIACJP MorganReinstates50.0
NUVASVB LeerinkMaintains92.0
SRPTCantor FitzgeraldMaintains211.0
SRPTPiperJaffrayMaintains210.0
LULUGoldman SachsMaintains219.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Grexit: European Disaster Or Tech Startup?

Short Sellers Shy Away From Biotech Stocks